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Kidney Credits Would Bring Life to Tax Reform

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Kidney Credits Would Bring Life to Tax Reform

July 17, 2017

By tomorrow at this time, twelve people will have died waiting for a kidney transplant. There are 500,000 people with end-stage renal failure and approximately 100,000 people are on the waiting list for kidneys. Approximately 20,000 people are waiting for hearts, livers, and lungs. 19,061 kidney transplants were performed in 2016. The numbers queued for kidneys are so high because patients with renal failure can exist for years on dialysis -- a thrice weekly process that cleanses the blood of toxins for four hours per session – while those with liver and lung failure die relatively quickly without a transplant.

The organ shortage has existed since the national organ procurement and distribution system established by the National Organ Transplant Act of 1984 (NOTA) became operational. The problem is simply that there are not enough donors.

Kidneys can be donated, but they must be given for free. NOTA permits reimbursement for donor expenses and some states allow income tax deductions and credits for those expenses, but those measures have not been sufficient to generate the donations that are needed

NOTA was adopted with noble intentions. The goal was to prevent a situation in which only wealthier patients could afford to buy organs and where poor donors might become “suppliers” for the well-off. More than enough time has elapsed to conclude that an altruism-only system is sorely inadequate. The greatest harms have fallen on the poor individuals needing a kidney, especially poor minorities. They are less likely to be listed for transplant and are less likely to receive an organ from a living donor or from the national pool even when they are referred.

For decades, the transplant community has mounted educational efforts, improved its procurement efforts at the time of death of potential donors, and tried a variety of other approaches. Yet, the number of living and deceased donors has not risen significantly.

The lack of financial compensation for donors is almost surely responsible for tens of thousands of needless death. Evidence suggests that living donors in the United States experience significant financial costs.

Studies report that up to 96 percent of living donors experienced financial consequences, including 47 percent who lose wages. Living donors may incur an average of $3,268 in expenses, with some reporting up to $8,000 of costs. Living donors who traveled greater distances, had lower household income, and had more unpaid work hours generally had larger costs. Donors’ expenses vary widely because resources to offset costs are variable by state, physical demands of the donor’s job (and associated expected recovery time), employer-provided benefits, and the recipient’s ability to provide financial assistance to the donor.

Efforts at reducing the financial burdens on living donors are fragmented and incomplete, leaving many living donors without assistance. A federal tax credit for organ donations would help ease the pressing shortage of donated kidneys, saving thousands of lives and sparing many from dialysis.

We therefore propose a $50,000 federal tax credit for living donors willing to save the life of a stranger by donating a kidney and a $5,000 federal tax credit for deceased donors of kidneys, intestines, pancreases, livers, and lungs.

The credit would be available only for a qualified donation. In a qualified donation, the donors’ kidneys would be distributed to people on the waiting list maintained by the Organ Procurement and Transplantation Network, which is administered by the United Network for Organ Sharing. People who wanted to donate a kidney to a relative or any other specific person would still be able to do so and could claim any tax benefits offered by their state, but they would not receive the federal tax credit.

Health insurers would be prohibited from free-riding on the credit by denying coverage to organ donors or excluding transplant-related costs from coverage. The availability of the credit would be conditioned on stringent safeguards and would not (at least initially) apply to directed donations to specific individuals. The additional credit would guarantee the availability of follow-up care for all donors.

As an additional safeguard against ill-considered donations by financially desperate individuals, the first disbursement of the credit would be only $5,000 and would occur in the tax year following the year in which the organ donation occurred. Another $5,000 would be allowed in each of the next four years, with the remaining $25,000 allowed in the following year.

By encouraging organ donations and thereby reducing expenditures on dialysis, the credit would be likely to save the government money, perhaps $10 billion per year. More importantly, it could potentially save thousands of lives.

Based on a longer version that originally appeared in Tax Notes

Sally Satel and Alan D. Viard are resident scholars at the American Enterprise Institute.

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